BILL NUMBER: SB 171	CHAPTERED  10/10/99

	CHAPTER   794
	FILED WITH SECRETARY OF STATE   OCTOBER 10, 1999
	APPROVED BY GOVERNOR   OCTOBER 7, 1999
	PASSED THE SENATE   SEPTEMBER 10, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 9, 1999
	CONFERENCE REPORT NO.   2
	PROPOSED IN CONFERENCE   SEPTEMBER 9, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN SENATE   APRIL 28, 1999
	AMENDED IN SENATE   APRIL 15, 1999

INTRODUCED BY   Senators Escutia, Speier, and Brulte, and Assembly
Members Villaraigosa, Scott, and Cedillo
   (Coauthors:  Senators Figueroa and Solis)
   (Coauthors:  Assembly Members Firebaugh, Gallegos, Longville,
Romero, and Washington)

                        JANUARY 11, 1999

   An act to add and repeal Article 5.5 (commencing with Section
11629.7) of Chapter 1 of Part 3 of Division 2 of the Insurance Code,
and to add Section 16020.1 to the Vehicle Code, relating to vehicles.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 171, Escutia.  Automobile insurance:  lifeline policies.
   Existing law requires motorists to demonstrate financial
responsibility by one of various means, including an automobile
liability insurance policy.  Existing law specifies minimum coverages
for the policy.  Existing law requires insurers to participate in a
plan, commonly known as the California Automobile Assigned Risk Plan,
to provide automobile insurance to those otherwise unable to obtain
coverage.
   This bill would require insurers that participate in the assigned
risk plan to also participate in a pilot program established by the
Insurance Commissioner for the County of Los Angeles to offer, until
January 1, 2004, a low-cost automobile insurance policy.  The bill
would provide that the low-cost policy would provide coverage of
$10,000 for liability for bodily injury or death to one person,
subject to a cumulative limit of $20,000 for all persons, and $3,000
for liability for damage to property.  The bill would also provide
that the low-cost policy would satisfy the financial responsibility
laws.
   This bill would specify annual rates offered initially under the
pilot program, until the time as the rates are adjusted in accordance
with procedures established in the bill.  The bill would also
specify certain surcharges to be added to the base rate in certain
cases.
   The bill would also provide that certain financial responsibility
requirements do not apply in the County of Los Angeles on and after
January 1, 2004.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  It is the goal of the Legislature that the pilot
program established by this act, if successful, should be expanded
statewide.
  SEC. 2.  Article 5.5 (commencing with Section 11620.7) is added to
Chapter 1 of Part 3 of Division 2 of the Insurance Code, to read:

      Article 5.5.  County of Los Angeles Low-Cost Automobile
Insurance Pilot Program

   11629.7.  (1) There is established, within the California
Automobile Assigned Risk Plan established under Section 11620, a
low-cost automobile insurance pilot program for the County of Los
Angeles.
   (2) The commissioner, after a public hearing, shall approve or
issue a reasonable plan for the equitable apportionment, among
insurers required to participate in the California Automobile
Assigned Risk Plan established under Section 11620, of persons
residing in the County of Los Angeles who are eligible to purchase
through the pilot program established in that county a low-cost
automobile insurance policy, as described in Section 11629.71.  The
pilot program shall be conducted in conjunction with the California
Automobile Assigned Risk Plan established under Section 11620.
   11629.71.  A low-cost automobile insurance policy for purposes of
the pilot program established under this article shall have all of
the following attributes:
   (a) The policy shall offer coverage in the amount of ten thousand
dollars ($10,000) for bodily injury to, or death of, each person as a
result of any one accident and, subject to that limit as to one
person, the amount of twenty thousand dollars ($20,000) for bodily
injury to, or death of all persons as a result of any one accident,
and the amount of three thousand dollars ($3,000) for damage to
property of others as a result of any one accident.
   (b) The policy shall have an initial term of one year, renewable
on an annual basis thereafter.
   (c) The policy shall cover the person named in the policy, and to
the same extent that insurance is provided to the named insured, any
other person using the automobile, provided the use is with his or
her permission, express or implied, and within the scope of that
permission, except that the policy shall not cover members of the
named insured's household who do not satisfy the requirements of
subdivisions (b) to (e), inclusive, of Section 11629.73.
   (d) The policy shall provide coverage for an automobile with a
value, at the time of purchase by the insured, of twelve thousand
dollars ($12,000) or less, as evidenced by the value given to the
automobile by the Department of Motor Vehicles in assessing vehicle
license fees.
   11629.72.  (a) The annual rate offered initially under the pilot
program for the low-cost automobile insurance policy, until the time
that the rate is adjusted, shall be four hundred fifty dollars
($450).  A surcharge of 25 percent of the base rate shall be added if
the named insured is an unmarried male between the ages of 19 and
24, inclusive, or if an unmarried male between the ages of 19 and 24,
inclusive, resides in the household of the named insured and will be
a driver of the automobile covered under the low-cost policy.
   (b) In addition to existing premium installment options offered by
the California Automobile Assigned Risk Plan under Article 4
(commencing with Section 11620), the plan shall also make available
to an insured under the pilot program, a premium installment option
pursuant to which an insured is required to pay one hundred dollars
($100) upon issuance of the low-cost policy, followed thereafter by
six other payments.  No other premium financing arrangement shall be
permitted.
   (c) Rates for policies issued under the pilot program shall be
reviewed and revised as follows:
   (1) Rates shall be sufficient to cover (A) losses incurred under
policies issued under the pilot program, and (B) expenses, including,
but not limited to, all reasonable and necessary expenses such as
the costs of administration, underwriting, taxes, commissions, and
claims adjusting, that are incurred due to participation in this
pilot program.  For purposes of this paragraph, "losses incurred"
means claims paid, claims incurred and reported, and claims incurred
but not yet reported.  In assessing loss reserves, the commissioner
shall only allow loss reserves that are estimated from actual losses
in the pilot program or comparable data by a licensed statistical
agent, as adjusted to reflect coverage provided under this pilot
program.
   (2) Rates shall be set so as to result in no projected subsidy of
the pilot program by those policyholders of insurers issuing policies
under the pilot program who are not participants in the pilot
program.
   (3) Rates shall be set with respect to this pilot program, and the
pilot program established in Article 5.6 (commencing with Section
11629.9), so as to result in no projected subsidy by policyholders in
one pilot program of policyholders in the other pilot program.
   (4) Commencing on January 1, 2001, and annually thereafter, the
California Automobile Assigned Risk Plan shall submit the loss and
expense data, together with a proposed rate for the low-cost
automobile policy for the pilot program, to the commissioner for
approval in accordance with this chapter.  The commissioner shall act
on the recommendation within 90 days.
   11629.73.  A low-cost automobile insurance policy under the pilot
program shall only be available for purchase by persons who satisfy
the following eligibility requirements:
   (a) The person shall be in a household with a gross annual
household income that does not exceed 150 percent of the federal
poverty level.
   (b) The person shall be no less than 19 years of age and have been
continuously licensed to drive an automobile for the previous three
years.
   (c) The person shall have not more than one of either, but not
both, of the following within the previous three years:
   (1) A property damage only accident in which the driver was
principally at fault.
   (2) A point for a moving violation.
   (d) The person shall not have on record within the previous three
years, an at-fault accident involving bodily injury or death.
   (e) The person shall not have a felony or misdemeanor conviction
for a violation of the Vehicle Code on his or her motor vehicle
record.
   (f) The person shall not be a college student claimed as a
dependent of another person for federal or state income tax purposes.

   11629.74.  (a) Application may be made through any producer
certified by the plan.  The applicant, in order to demonstrate
financial eligibility to purchase a low-cost automobile insurance
policy under the pilot program, shall present at the time of applying
for the policy, a copy of the applicant's federal or state income
tax return for the previous year or other reliable evidence from a
governmental agency or governmental means-tested program of the
applicant's gross annual household income, pursuant to regulations
issued under subdivision (b) of Section 11629.79.
   (b) The applicant shall certify that the representations made in
the documents submitted as proof of financial eligibility and in the
application for the policy are true, correct, and contain no material
misrepresentations or omissions of fact to the best knowledge and
belief of the applicant.
   (c) The certified producer shall forward the application,
supporting documents, and the applicant's certification to the
California Automobile Assigned Risk Plan.
   11629.75.  (a) A certified producer shall provide to an applicant
for a low-cost automobile insurance policy under this article a
notice relating to coverage under the policy.  The notice shall be
provided in a separate document at the time of application, and
include the following statement in 14-point boldface type:
      "NOTICE
    INSURANCE COVERAGE PROVIDED IN THE POLICY YOU ARE BUYING CONTAINS
REDUCED LIABILITY COVERAGE FOR PERSONAL INJURIES OR PROPERTY DAMAGE
RESULTING FROM THE OPERATION OF THE INSURED VEHICLE.  IF LOSSES FROM
AN AUTOMOBILE ACCIDENT EXCEED THE COVERAGE PROVIDED BY THIS POLICY,
YOU CAN BE HELD PERSONALLY LIABLE AND RESPONSIBLE FOR THOSE LOSSES.
THIS POLICY PROVIDES LIABILITY COVERAGE FOR INJURIES OR DEATH CAUSED
TO OTHER PERSONS IN THE TOTAL AMOUNT OF TEN THOUSAND DOLLARS
($10,000) PER PERSON IN ANY ONE ACCIDENT, AND UP TO A TOTAL AMOUNT OF
TWENTY THOUSAND ($20,000) FOR ALL PERSONS IN ANY ONE ACCIDENT.  THE
POLICY ALSO PROVIDES UP TO A TOTAL AMOUNT OF THREE THOUSAND DOLLARS
($3,000) IN LIABILITY COVERAGE FOR PROPERTY DAMAGE IN ANY ONE
ACCIDENT.  IF YOU WANT MORE INSURANCE COVERAGE, YOU MUST REQUEST A
DIFFERENT POLICY.
THIS POLICY ALSO DOES NOT COVER DAMAGE TO YOUR OWN VEHICLE, LOSSES
RESULTING FROM YOUR BODILY INJURY OR DEATH, OR COVERAGE FOR LOSSES
CAUSED BY AN UNINSURED OR UNDERINSURED DRIVER.  HOWEVER, THESE OTHER
COVERAGES MAY BE AVAILABLE AT EXTRA COST THROUGH OTHER INSURERS.
THIS POLICY DOES NOT COVER ANY OTHER DRIVER IN YOUR HOUSEHOLD WHO:
(a) IS UNDER 19 YEARS OF AGE; OR
(b) HAS LESS THAN 3 YEARS OF CONTINUOUSLY LICENSED DRIVING
EXPERIENCE; OR
(c) HAS MORE THAN ONE OF EITHER, OR BOTH, OF THE FOLLOWING:
--A PROPERTY DAMAGE ONLY ACCIDENT IN WHICH THE DRIVER WAS
PRINCIPALLY AT FAULT.
--A POINT FOR A MOVING VIOLATION; OR
(d) HAS IN THE PREVIOUS 3 YEARS AN AT-FAULT ACCIDENT INVOLVING
BODILY INJURY OR DEATH; OR
(e) HAS A FELONY OR MISDEMEANOR CONVICTION FROM A VIOLATION OF THE
VEHICLE CODE ON HIS OR HER MOTOR VEHICLE RECORD."

   (b) When the certified producer establishes delivery of the
disclosure form specified in subdivision (a) by obtaining the
signature of the applicant or insured, there shall be a conclusive
presumption that the certified producer has complied with the
disclosure requirements of this section.
   11629.76.  For a low-cost automobile insurance policy issued
pursuant to the pilot program, certified producers shall be entitled
to the same commission rate as is paid by the California Automobile
Assigned Risk Plan for private passenger, nonfleet risks under
Article 4 (commencing with Section 11620).  No other fees of any kind
may be charged or collected in this regard and the sale of a
low-cost policy under this article shall not be conditioned on the
purchase of any other product or service.
   11629.77.  (a) A low-cost automobile insurance policy issued
pursuant to the pilot program shall be canceled only for the
following reasons:
   (1) Nonpayment of premium.
   (2) Fraud or material misrepresentation affecting the policy or
the insured.
   (3) The purchase of additional automobile liability insurance
coverage in violation of subdivision (a) of Section 11629.78.
   (4) The purchase or maintenance of automobile liability insurance
coverage other than a low-cost policy for any additional vehicles in
the insured's household, in violation of subdivision (b) of Section
11629.78.
   (b) A policy shall be nonrenewed only for the following reasons:
   (1) A substantial increase in the hazard insured against.
   (2) The insured no longer meets the applicable eligibility
requirements.  In this regard, the eligibility of an insured shall be
recertified by the California Automobile Assigned Risk Plan after
the first year of eligibility, and annually thereafter by the insurer
that issued the policy.
   11629.78.  (a) An insured under the pilot program shall not
purchase automobile liability insurance coverage that is in addition
to the liability coverage provided by the low-cost policy.  However,
the insured may purchase any other additional type of automobile
insurance coverage, such as uninsured motorist coverage or collision
coverage outside the plan.
   (b) An insured under the pilot program shall not purchase or
maintain any automobile liability insurance coverage other than a
low-cost policy for any additional vehicles in the insured's
household.
   (c) No more than two low-cost policies are permitted in an insured'
s household.
   11629.79.  (a) The pilot program is authorized to commence
operations on January 1, 2000, but shall be fully operational no
later than July 1, 2000.
   (b) To this end, the commissioner, in consultation with the
California Automobile Assigned Risk Plan, shall adopt regulations to
implement the provisions of this article within 60 days of its
effective date.  The regulations shall be adopted as emergency
regulations in accordance with Chapter 3.5 (commencing with Section
11340) of the Government Code, and for purposes of that chapter, the
adoption of the regulations shall be considered by the Office of
Administrative Law to be necessary for the immediate preservation of
the public peace, health and safety, and general welfare.
   11629.8.  Notwithstanding the coverage amounts required by Section
16056 of the Vehicle Code, a low-cost automobile policy issued under
the pilot program shall satisfy the financial responsibility
requirements of Section 16021 of the Vehicle Code.
   11629.81.  The California Automobile Assigned Risk Plan shall
report to the Legislature on an annual basis, commencing January 1,
2001, and at those additional times as it deems prudent, on the
status of the pilot program.
   11629.82.  Nothing in this article is intended to amend or
otherwise affect or interpret any provision of Proposition 103,
approved by the electors on November 8, 1988, and no provision of
that initiative measure applies to this article.
   11629.83.  An action challenging the constitutionality of the
establishment of the pilot program by this article shall be commenced
in a court of competent jurisdiction no later than February 1, 2000.

   11629.84.  This article shall remain in effect only until January
1, 2004, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2004, deletes or extends
that date.
  SEC. 3.  Section 16020.1 is added to the Vehicle Code, to read:
   16020.1.  (a) On and after January 1, 2004, Section 4000.37 does
not apply in the County of Los Angeles.
   (b) On and after January 1, 2004, subdivision (a) and (b) of
Section 16028 do not apply to a person who drives a motor vehicle
upon a highway in the County of Los Angeles.
